UOBKayhian on 3 Feb 2014
FY14F PE (x): 34.5
FY15F PE (x): 25.5
We expect 3QFY14 ex-EI net profit to fall 47% yoy to $86m. Weak pax yields along with steep losses from 40%-owned Tigerair should lead to an estimated 47% yoy decline in 3QFY14 earnings. SIA is also likely to report EI losses of S$80.9m for the period, due to cargo price fixing settlements.
Maintain HOLD and lower target price to S$11.30 (from S$11.40). We value SIA (ex- SIAEC) at 0.8x forward book and adjust for its fair value stake in SIAEC. Our target price implies 0.97x FY14F P/B (at group level). A re-rating for SIA is undeserved given its muted earnings outlook for both parent airline and associates. We think share price downside will be supported by its current cheap valuations (currently trading at 0.87x FY14F P/B). We would start accumulating at S$9.80/share, which provides a 15% upside to target price.
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